WTO in Cancun: State Help to Farmers May Fuel Global Debate

The term is subsidies. Rich countries put about $300 billion in subsidies into their farmers' pockets every year. Poorer countries contend they can't compete with this. They don't have money to pay such sums, and low-priced food from rich countries undercuts their farmers.

So far, the debate has revolved around payments made by national governments. Japan pays about $21,000 in subsidies a year per farmer; the European Union pays $17,000, and the U.S. $16,000, according to the Paris-based Organization for Economic Cooperation and Development.

While global trade talks often seem abstract, this issue is very real. Farmers in Washington state, who are among the nation's biggest exporters, receive $295 million a year in federal subsidies.

That cash is on the table here, where the World Trade Organization is meeting to set up trade rules. U.S. Trade Representative Robert Zoellick said he's ready to cut subsidies and tear down tariffs if other nations will agree to do so.

Freeing farm trade is good for the world economy, Zoellick said. It would boost world income by $830 billion a year, with developing countries receiving two-thirds of that, according to the World Bank. Freeing rules for services would produce another $900 billion gain. That's why 146 countries are here to bargain.

State and local tax exemptions to Washington farmers totaled $144 million in 2001, part of $519 million in such exemptions. The total rises to $301 million when other forms of support, such as export promotions, are included, according to the study by the Asia Pacific Environmental Exchange Center for Applied Ecological Economics , a Seattle-based non-profit group.

The aerospace industry receives another $126 million, which is largely because Boeing doesn't pay state sales tax on airplanes it sells.

This notion could open a new front in the battle over subsidies. It suggests rich-nation governments actually provide more aid than is being counted.

And it could put that additional money on the WTO's bargaining table alongside federal money, said David Batker , who authored the study with Maria Cain.

The state doesn't dispute that there are sizable tax breaks for businesses. But it said Batker and Cain's report probably overstates the amount of aid - and its impact. State aid also isn't linked specifically to exports, so it wouldn't be subject to WTO rules, said Robert Hamilton, trade adviser for Gov. Gary Locke.

"There are tax breaks for certain industries, but they don't say you only get the exemption if you export the product," he said.

Batker contends that the breaks would be export subsidies in the eyes of the WTO. "If 85 percent of Washington's wheat is being exported, any subsidy to that wheat is de facto an export subsidy," he said. He's concerned that the U.S. will end up losing state subsidies under rules being worked out here.

"Washington farmers are going to be in for a big shock if this actually is approved," he said. "In 10 years they will find their subsidies removed by WTO decisions."

The European Union also has tax subsidies that could come into question. The EU said it's unlikely the WTO would go that far. As long as the money isn't being directly paid out to farmers, it probably won't be counted by WTO.

"If the EU hasn't harmonized its 15 members on taxes, you can imagine how much harder it would be to take it one level higher in the WTO," said Gregor Kreuzhuber, spokesman for European Commission's agriculture directorate.

But Batker said the figures are significant to developing countries, who are bargaining here for those amounts to be cut.

"When the state pays for a dollar of marketing, that's a dollar the farmer doesn't have to spend," he said. "I'm not saying we're opposed to these programs. But when we look at state help, we've got to take this into account."

Alwyn Scott: 206-464-3329 or ascott@seattletimes.com